Usury

The Treasury Department announced its quarterly financing for March 15. It offered 475 millions worth of Treasury certificates to run for nine months at an interest rate of 4 3/4%. To Mr. Mellon it must have seemed very much as if the people were exacting usurious interest from their Government. In the last five years he has sold Treasury certificates bearing as low .as 2 3/4%. True, last October he was also obliged to pay 4 3/4%, but in December, coincident with a break in the stock market he was able to market an issue at 4 1/4%, although there was not the customary oversubscription of double or more. The March offering was taken to indicate that the Treasury does not expect "cheaper" money for some months. Last week the Treasury made public the fact that it was considering the plan of selling non-interest-bearing Treasury bills. These securities would be offered to the public not quarterly but as the Government needed money. They would fall due at income tax dates or other times when the Government expected to be able to pay them off. They would have to be sold below par and the difference between the purchase and redemption values would constitute the interest yield. This system is now used by the British Government and it is believed it might result in considerable interest savings to the U.S. because: 1) bills need be sold only when money is actually required; 2) there would be no chance for error such as the Treasury's offering an issue at an unnecessarily high rate of interest (by reason of a poor estimate as to what rate will sell an issue), or offering an issue at too low a rate with the result that it would not be subscribed. The non-interest bearing certificates would simply be sold to the highest bidders and the rate of interest automatically fixed at the closest margin possible. The present law which forbids offering Treasury certificates at below par would have to be amended to permit this practice.